HDFC - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, HDFC's standalone net profit grew by 16.1% yoy, which was above our estimates mainly because of higher net interest income than estimated by us. We maintain our Neutral view on the stock.

Loan growth remains healthy: For 4QFY2012, HDFC's loan book grew by healthy 19.9% yoy (up 6.2% qoq) to Rs.140,422cr. Approvals in 4QFY2012 stood at Rs.26,965cr (up 21.5% yoy), while disbursements stood at Rs.21,335cr (up 15.9% yoy). For 4QFY2012, HDFC's NII increased by 29.0% yoy, as bank relied on term loans from banks (up 62.9% qoq) rather than short term borrowings for their funding requirements during 4QFY2012, bringing down its cost of funds (NIMs up by 115bp qoq during 4QFY2012 compared to 72bp in 4QFY2011). For 4QFY2012, the bank's other income decreased by 23.0% yoy to Rs.271cr due to lower fee income and lower income from sale of investments. HDFC's asset quality continued to be stable during 4QFY2012, with gross NPA ratio falling by 3bp yoy to 0.74%. On a six-month overdue basis, gross NPA ratio stood at 0.44%. Gross NPAs grew by 18.5% yoy to Rs.1,069cr. HDFC continued to maintain a 100% provision-coverage ratio for 4QFY2012, similar to 3QFY2012.

Outlook and valuation: At the CMP, HDFC's core business (after adjusting Rs.226/share towards the value of its subsidiaries) is trading at 3.4x FY2014E ABV of Rs.126.9 (including subsidiaries, the stock is trading at 3.7x FY2014E ABV of Rs.178.7). We expect HDFC to post a healthy PAT CAGR of 18.7% over FY2012-14E. However, considering that the stock is currently trading at 4.1x one-year forward P/ABV and at a 35.8% premium to the Sensex in P/E terms (compared to an average of 31.1% over the last five years), we consider the stock to be fully valued and, hence, recommend Neutral on the stock.

Source : Equity Bulls

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